MoneyMagpie

Jul 17

What is a credit union and how can you join one?

Reading Time: 3 minutes

If you’re sick to the back teeth of banks but can’t see any alternative, take a look at credit unions. They’re non-profit, helpful, local and do a lot of good in the community.

It’s highly likely that you have a credit union in your area and it will offer a good savings and loans operation, and possibly much more besides (such as mortgages).

What is a credit union?

Credit unions are like building societies used to be (before they started to think of themselves as banks). They are run by local people for local people. Customers (or ‘members’) open up current accounts and savings accounts and the money they put in is used to loan to other local people.

There are also credit unions for many professions – so you will often find credit unions set up especially for nurses, police or teachers for example. Ask your trade union if your profession has one.

Credit unions have been around for decades and are huge in many other countries including the USA, France and India.

However in this country they were held back for years, because governments in the 80s and 90s feared that they could present serious competition to the City.

Why should I use a credit union?

Unlike banks and building societies, credit unions are non-profit – so any excess they make gets ploughed back into the operation itself.

Credit unions often offer competitive savings rates, so it can be worth joining just to open up a savings account (even if you don’t use it for normal banking).

Money put into a savings account with a credit union not only attracts decent rates but is used to help the local area. Statistics show that every £1 put into a savings account with a credit union does roughly £10-worth of good in the community.

They also provide an alternative for many people who would otherwise find themselves taking out high interest payday loans or, worse, borrowing from loan sharks.

Credit unions are usually willing to give small loans to members which banks generally won’t do. In fact a feasibility study by the DWP found that credit unions offer the most competitive interest rates on personal loans of up to around £2,000 in the UK market.

They also help members to budget and encourage them to pay off their loans as quickly and cheaply as possible, so they are particularly helpful for people on low incomes and those who have difficulty stretching their income to make needs meet.

six_magpie
Sign Up – Newsletter

Are credit unions safe?

Yes. Credit unions are regulated by the FSA and covered by the Financial Services Compensation Scheme (FSCS) – which means that up to £85,000 of your money would be protected in the unlikely event that the credit union went bust.

What are the downsides?

Credit unions vary greatly across the country. Some offer a wide range of services and can rival banks. Others offer very few and are only open at certain hours of the week. This is changing as the last Labour government and the current Coalition have strongly encouraged credit unions and helped them to grow.

Many credit unions still don’t have online banking services, so you may well need to go into your local branch to carry out transactions.

How do I join a credit union?

You can find your local credit union by going to Findyourcreditunion and putting your postcode in. It will show you which is the nearest one to you.

When you go to the credit union they will need to see some ID and will need to meet you in person at least once.

WHAT DO YOU THINK?

Leave a Reply

avatar
  Subscribe  
Notify of

Related Articles

Experian Financial Control
 

Make Money and Save Money

ideas for everyone
 

Send this to a friend